Ag Conditions/Farm Income Spending

Agricultural Credit Conditions Survey Summary by State

Edward Lotterman | Agricultural Economist

Published October 1, 1996  | October 1996 issue


With excellent crops and grain prices in Minnesota, bankers' estimates of farm income, household spending and capital spending-already above normal in the second quarter-increased in the third quarter and are now the highest in this decade. Loan-to-deposit ratios increased about 5 percentage points, but bankers still report adequate loanable funds. Loan repayment rates are above average, while renewals and referrals to other lenders are below normal and down from preceding quarters. The proportion of Minnesota borrowers at their debt limit increased another 10 points as farmers made late summer purchases in anticipation of good crops and prices.


The situation in cattle-dependent Montana continues gloomy, if not grim. Estimates of farm income and spending, already low in the second quarter, continued to drop and are now at their lowest level in this decade, with one-half to two-thirds of bankers rating these below normal. Volumes for many loan categories are below normal as ranchers forego purchases and improvements. Montana bank loan-to-deposit ratios are at 75 percent, the highest in the district. Nearly 46 percent of borrowers are at their loan limits. A number of Montana bankers anticipate increased business liquidations before the 1997 season.

North Dakota

Crop planting and progress lagged well behind usual mileposts throughout the season, and in mid-August, North Dakota lenders were apparently reluctant to assume the harvest would turn out well. Estimates of income and spending improved moderately from the second to the third quarter, but remained slightly below normal levels, and much below neighboring Minnesota. Funds availability and loan repayment rates are rated somewhat below normal while extensions are up and above normal. Loan-to-deposit ratios, at 72 percent are at desired levels. Nearly a quarter of borrowers are at their debt limits, up from the second quarter, but that level is still the second lowest among the five states polled.

South Dakota

South Dakota and Montana suffered the hardest hits in the district from depressed cattle prices, but in South Dakota improved crop incomes have helped more than in Montana. Income and capital spending indicators remain below normal levels. However, they have improved somewhat from the preceding two quarters, and bankers expect them to reach normal or near-normal levels in the final three months of 1996. Household spending is already at normal levels. Overall, bankers rate funds availability as about normal, but with wider dispersion about the mean than in any other state.

Northwestern Wisconsin

In spite of the impact of higher feed costs on dairy producers, Wisconsin bankers are nearly as upbeat about the financial status of their farm customers as their colleagues in Minnesota. Higher milk prices throughout the summer and generally good crops and forage yields apparently have improved outlooks from earlier quarters. Income and household spending are already rated well above usual levels, and capital spending is expected to join them in the fourth quarter. Available funds are the highest in the district, and the proportion of borrowers at their debt limits is the lowest.